The Daily Dilemma
A look at the future of daily fresh-food deliveries, and what’s in their way.
Unfortunately, it is difficult to calculate how much daily deliveries would cost without factoring in specifics such as number of stores, distance between stores, type of products, the distributor, volumes and what else is on the truck. But generally, nonvariable delivery costs can range from $70 to $120 for a once-weekly broad-line distributor, which includes fuel costs, insurance, the driver’s wages, etc. When you add in additional deliveries a week, that fee does goes down on a variable basis, but a retailer could still be paying somewhere around $300 a week for five deliveries.
On the distributor side, Holand acknowledges that those who did not “grow up” in the restaurant channel must have the right equipment and space to handle fresh, including refrigerated and frozen storage, and a refrigerated cross-docking area.
“It’s all about the sales throughput, managing out-of-stocks and waste,” she says. Then, as long as a distributor can support refrigeration and cross-docking, “I don’t see any big challenge with the distribution cycle whether you’re small or large.”
Gerald Lewis, a New York-based retail consultant, believes distributors also must differentiate.
“The opportunity for wholesalers is to not to try to sell the same fresh prepared foods to every customer,” Lewis says. “The challenge is, ‘How can I set myself apart by enabling each retail chain to have a differentiated offer, by providing prepared foods made to their own specifications?’ ” Earlier c-store industry cold-chain efforts did not get off the ground, he says, because distributors did not provide customized product for key customers, but rather an across-the-board offer.
“If an individual retailer can do it with a commissary and supply their own transport, shouldn’t a wholesale organization that already has food preparation facilities and refrigerated trucks be able to deliver chain-specific foods more efficiently than individual commissaries?” Lewis says. “It doesn’t have to be a smaller wholesaler—it needs to be one that thinks in terms of supplying the competitive needs of its customers.”
Two Problems, One Solution
As retailers turn to their distribution partners for fresh-food solutions, each of the distributors have taken on their own strategies for delivering based on retailer needs.
McLane Co., the industry’s largest wholesaler, offers whole and cut produce, sandwiches, salads and milk through its Fresh on the Go program. Hope LaGrone, product director, says via e-mail that operators have the flexibility to source from the program the type of products they need—retail-ready, refrigerated components that can be assembled on site, or thaw-and-serve products when demand is volatile.
The Temple, Texas-based distributor works with each customer and sometimes individual stores on assortment and delivery frequency based on factors such as geography, local competition and equipment. The typical delivery schedule is two times a week. “However, if a customer requires more than two times a week, we can accommodate their needs,” says LaGrone. One of McLane’s customers receives fresh product five times per week.
“Most of McLane’s retailers seem to understand that a decision to invest in a fresh program requires a significant commitment of both time and resources,” says LaGrone. McLane also has tools and programs to help retailers anticipate expenses associated with launching a fresh program.
“A modern fresh/foodservice platform is undoubtedly one of the most challenging undertakings a retailer can voluntarily pursue; however, the rewards can far outweigh the introductory pangs,” says LaGrone. She believes many c-store retailers execute fresh and foodservice at least as well as QSRs and grocery stores.
“With that said, failures will linger with consumers far longer than successes, so a c-store operator that decides to introduce fresh must effectively ‘brand’ their store accordingly,” she continues. This includes micromanaging inventory; selecting an appropriate mix of items; and showcasing clean, bright and conveniently designed equipment.
For its part, South San Francisco, Calif.-based Core-Mark International Inc. has a specific number in its sights: 20%. That’s the percentage of sales revenues foodservice represents for many of the top c-store retailers, says Chris Hobson, senior vice president of marketing for Core-Mark. The company has made it a goal to not only help independent operators reach that 20% threshold, but also for Core-Mark itself to see 20% sales revenue from foodservice. For the distributor, this figure is currently at 8%.
“It gives us a vision, a mark to measure ourselves against,” says Hobson.